Saturday, September 27, 2008

CPA Asks for Prayers of Wisdom in Financial Meltdown

West Texas Congressman Mike Conaway has a unique skill set, given America's current economic crisis. Conaway is a certified public accountant, meaning he understands corporate finance better than most people in the Capital. As a constituent with concerns and questions, I've been most interested in hearing from Rep. Conaway. So far, my e-mails have gone unanswered.

Research found a few general quotes in area newspapers. Mike suggested a thoughtful, measured approach, but provided few clues on the credit market collapse or appropriate remedies for clogged credit arteries.

Mike spoke up eight days after the watershed event, posting a podcast on his blogsite. After calling the situation "historic", "uncharted waters" and "sobering", Conaway spoke to the House Republican plan. He offered up a FDIC insurance like plan. Funds would come from fees on people who own these assets.

It's a great idea for five to ten years ago, where time and wise investment could build adequate reserves. Homeowner's insurance companies don't write new plans when a hurricane enters the Gulf of Mexico. Conaway's insurance proposal is similar to writing insurance on Galveston Island during the temporary calm of a Hurricane Ike's eye.

He noted the importance of keeping the "day in-day out, blocking & tackling" around lending going. He pointed to events on September 17-18 that caused credit to grind to a halt, but he didn't say what happened.

The Wall Street Journal reported Morgan Stanley's credit default swaps hit $900,000 for coverage on $10 million of their debt on September 18. Last summer a similar swap on Goldman Sach's debt went for $100,000, and that was considered junk status. An eightfold increase in "peace of mind" coverage on Wall Street debt qualifies as a huge problem. Thus, the phone calls to Hank Paulson.

The big money boys complained about pay day loan rates. Yet, they charged each other those exorbitant, effective interest rates. Wall Street expected their peers to welch on their borrowings. Risk got priced at premium levels. The big boys refused to pay, clogging our credit arteries.

Mike never said a word about the specific developments of mid-September, but he did ask for our prayers during this "big economic storm." He quoted a verse in Chronicles where Solomon asked God for "wisdom and knowledge that he might govern." Mike asked the people pray for wisdom for him, his House and Senate colleagues, and the White House.

Dang, I'd hoped to hear some CPA sharpened financial insights to the problem, not a prayer request. But I did comply. Minutes ago, I gave Mike that coveted wisdom prayer. What's the turnaround time on that? Hopefully, short and not blowing in the wind.

One last question, when the engine crew of the Titanic comes on deck asking passengers for prayers, should they be worried?